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A fine example of successful restructuring of a public bank instead of privatisation was elaborately outlined by a top Indian banker, Mrs. Ranjana Kumar, who is the Chairperson/Managing Director of the Indian Bank at a seminar organised by the Central Bank in Colombo last week.

She emphasised the fact that even a low performing public bank can be turned around to be a profit-making, successful bank by way of applying an effective restructuring plan.

Mrs. Kumar is highly regarded in India as the person who has achieved a near-miracle of nursing the terminally sick Indian Bank and setting it on a growth path.

Speaking on the theme Restructuring and Overcoming odds - True story of a public sector bank, Mrs. Kumar said that the Indian Bank reported a huge net loss for the year 1995-96.

Following are excerpts of her speech:

This slippage of the bank to losses during 1995-2001 did not happen all at once. It was a gradual fall due to the faulty methods and systems over a period of time. Earlier the bank was re-capitalised, based on a Strategic Revival Plan submitted by the Bank, but it became a sunk capital due to various reasons.

Later, on a detailed analysis, it was identified that the Bank suffered from several weaknesses. Accordingly, the bank submitted a Restructuring Plan 2000-03 to the Government of India in June 2000 which was inter-alia aimed at turnaround of the bank to net profit and achieving the required Capital Adequacy Ratio. The plan was prepared in-house without assistance from any outside agency and was vetted by the Government of India and the Reserve Bank of India, after several rounds of discussions.

During the three years of the Restructuring Plan, the Bank could achieve consistent growth in business and also a sustainable turnaround, due to initiation of various structural, operational, cost control, marketing and motivational strategies and strengthening of the planning and monitoring system in the bank. These strategies have brought about overall re-engineering of the bank's business performance and enhanced its ability to face challenges in the future.

Highlighting the performance under the Restructuring Plan Mrs. Kumar said in the first year the bank posted a higher operating profit of Indian Rs. 61.59 crore. During the second year (2001/02), the bank turned around to post a net profit, a year ahead of the target and also gained a positive networth.

During the third year (2002/2003), the bank sustained the turnaround by improving the net profit by 468% to Rs. 188.83 crore. The bank has also reached a capital adequacy ratio of 10.85% against the required norm of 9%, consequent to recapitalisation by the Government of India.

The bank's business grew during the Restructuring Plan period by Rs. 10,818 crore or 37% despite the bank not having a level playing field due to inadequate CRAR, during these years. It was significant to note that over one-fourth of the growth in business since the inception of the bank, has taken place during the three years of the Restructuring Plan.

Thus the Plan witnessed a complete turnaround of the bank in terms of net profit and fulfilment of Capital Adequacy norm and resulted in an accelerated growth in business. The bank's performance under the Restructuring Plan has been quite gratifying. This is evident from the fact that the bank during this period, has improved its performance in these parameters during the three-year period prior to the commencement of the plan. This significant improvement is due to the initiation of various structural, operational, cost control, marketing and motivational strategies and strengthening of the planning and monitoring system in the bank, she said.

The Restructuring Plan covered areas such as Rationalisation of structure, Marketing, Customer Segmentation, Resource Mobilisation, Development of Resources - Credit Management, Management of Non-Performing Advances, Accent on Planning, Profit and Profitability, House Keeping, HRD/Staff Motivation and Involvement/Commitment, Technology Up-Gradation, Corporate Governance and Formulation of Policies.

As the Bank has staged a turnaround and that the Restructuring Plan is over, the Bank has put in place a long term plan called Vision 2010, to sustain and improve upon the performance under the Restructuring Plan and also to take advantage of the favourable environment in the Bank.

The Vision 2010 is a plan drawn up taking into consideration the views of all tiers in the Bank, towards building a financially strong, vibrant and market savvy organisation. Vision is foreseeing of the future, from a higher platform at macro level, with a positive and right thinking. The Bank aims at harnessing and channelling its potential, resources, ability and willingness in achievement of goals delineated in the Vision. Vision 2010 is a dynamic plan and it can be re-drawn/revised as and when necessary. With the exemplary human capital available in the Bank, the Bank has plans to make the best use of technology to make it market competitive.

The objectives of 'Vision 2010' are to (a) sustain and improve upon the tempo of progress recorded during the last three years under the Restructuring Plan (b) become one among the best banks in the country (c) use Human Resources and Technology as the drivers and these two resources would be churned and updated continuously for realising the vision of the Bank.

The performance of the Bank during the Restructuring Plan 2000-03 has to be viewed from the fact that the Bank did not have adequate CRAR and networth and therefore did not have a level playing field and the Singapore Branch was working on an interim arrangement.

The sustaining of the turnaround during 2002-03 and improvement in the performance recorded during the Restructuring Plan is the first step and the Bank is now 'Poised for Higher and Consistent Growth' and is 'in pursuit of excellence in Banking'. The Bank is emerging stronger to serve its customers with a 22,400 reenergised and committed workforce, she said.

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